Mission Indradhanush - All you need to know

mission indradhanush
A PLAN FOR REVAMP OF PUBLIC SECTOR BANKS

ROAD MAP -

  1. Appointments
  2. BBB ( Bank Board Bureau )
  3. Capitalisation
  4. De-stressing
  5. Empowerment
  6. Framework of Accountability
  7. Governance Reforms

APPOINTMENTS

  • The post of chairman and MD in public sector banks to be split into :
  • MD and CEO
  • Non-Executive Chairman
  • This approach is based on global best practices
  • As per the guideline in the companies Act it will ensure appropriate checks and balances in day to day functioning of these banks .
  • The selection process for both these positions has been made more transparent and meritocratic
  • Under the new process of selection for MD &CEO , even private sector candidates were also allowed to apply for position of MD & CEO .

BANK BOARD BUREAU

  • BBB ( Bank Board Bureau ) will be a body of eminent professionals and officials, which will replace the Appointments Board for appointment of Whole-time Directors as well as non-Executive Chairman of PSBs.
  • It is an autonomous body.
  • They will also constantly engage with the Board of Directors of all the PSBs to formulate appropriate sttjtegies for their growth and development.
  • Help banks develop differentiated strategies of capital raising plans to innovative financial methods and instruments
  • The bureau will have three ex-officio members and three expert members (of which two would necessarily be from the banking sector), in addition to the Chairman.
  • The Search Committee for members of the BBB comprise of the Governor, RBI and Secretary (FS) and Secretary (DoPT) as members
  • VinodRai, a former comptroller and auditor general is chairman.
  • Other members of the bank board bureau include
  • Anil K. Khandelwal, former chairman :nd managing director of Bank of Baroda,
  • N. Sinor, former joint managing director of ICICI Bank and
  • RupaKudwa, former managing director of rating agency Crisil,
  • The tenure of all the appointees will be two years.
  • The bureau will also have members from the government.

Capitalization

  • Although PSBs have been under stress, but they are still adequately capitalized and meeting all the Basel III and RBI norms.
  • Now, the Government of India has shown its intent to adequately capitalize all the PS banks to have a safe buffer over and above the minimum norms of Basel III during the next few years.
  • Out of total requirement the Government of India proposes to make available Rs 70,000 Cr. Out of budgetary allocation for four years as per the following table :

Allocation of Fund
Financial Year 2015 -16 Rs 25,000 Cr
Financial Year 2016 -17 Rs 25,000 Cr
Financial Year 2017 -18 Rs 10,000 Cr
Financial Year 2018 -19 Rs 10,000 Cr
Total Rs 70,000 Cr

De-stressing PSBs

  • The infrastructure sector and core sector have been the major recipient of PSBs' funding during the past decades.
  • But due to several factors, projects are increasingly stalled/stressed thus leading to NPA burden on banks.
  • In a recent review, problems causing stress in the power, steel and road sectors were examined

The major reasons affecting these projects

  • Delay in obtaining permits / approvals from various governmental and regulatory agencies,
  • land acquisition, delaying Commercial Operation Date (COD); lack of availability of fuel, both coal and gas; cancellation of coal blocks;
  • Closure of Iron Ore mines affecting project viability; lack of transmission capacity;
  • limited off-take of power by Discoms given their reducing purchasing capacity;
  • Funding gap faced by limited capacity of promoters to raise additional equity
  • Reluctance on part of banks to increase their exposure given the high leverage ratio; inability of banks to restructure projects even when found viable due to regulatory constraints.

Measures
  • Project Monitoring Group (Cab. Sectt.) / Respective Ministries will pursue with concerned agencies to facilitate issue of pending approval/permits expeditiously
  • Pending policy decisions to facilitate project implementation/operation would be taken up by respective Ministries/Departments.
  • Ministry of Coal/PNG will evolve policies to address long-term availability of fuel for thee projects.
  • Respective Discoms will be provided hand-holding towards enabling early reforms.
  • Promoters will be asked to bring in additional equity in an attempt to address the worsening leverage ratio of these projects.
  • Wherever the promoters are unable to meet this requirement, the Banks would consider viable options for substitution or taking over management control.
  • The decision to increase import duty on steel has already been taken.
  • RBI has been requested to consider the proposal of the Banks for granting further flexibility in restructuring of existing loans wherever the Banks find viability.


Empowerment

  • The Government has issued a circular that there will be no interference from Government and Banks are encouraged to take their decision independently keeping the commercial interest of tht organisation in mind.
  • The Government intends to provide greater flexibility in hiring manpower to Banks.
  • The Government is committed to provide required professionals to the Board so that well-informed and well-discussed decisions are taken.

Framework of Accountability

  • The government also announced a new framework of key performance indicators for state-run lenders to boost efficiency in functioning while assuring them of independence in decision making on purely commercial considerations.
  • A clear distinction has been made between interference and intervention
  • A robust grievance redressal mechanism is being put in place for customers of banks as well as staff.

Governance Reforms
  • Performance link incentives will be announced .
  • No political Interference in Bank .

Conclusion
  • After Reading the above facts , we can forecast there are 2 Basic challenges infront of Banking Sector , these are as follows : -

Financial Challenges Non - Financial Challenges
A.    NPA (Non Performing Assets )
B.     Financial Inclusion
C.     Capitalisation
A.    Political Interference
B.     High attrition rate
C.     Vacant position at higher level

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